The Story Behind the Carrier's Mutinous Marketing Machine

It's a Wednesday afternoon in June and a corner of downtown Seattle is flooded with magenta. Dressed in the trademark color of T-Mobile, the fourth-largest U.S. wireless carrier, hundreds pour into the Paramount Theatre to see two stars. One, hometown hip-hop hero Macklemore, would come on later in the night.

The other takes the stage at 6:07 p.m. A microphone drops before a thickset man, who, playing the part of a boxing-ring announcer, gives a roaring introduction to John Legere as he sprints to the front in black leather jacket and pants, hot-pink shirt and socks while collecting hand slaps, cellphone clicks and riotous applause.

The Un-CEO is in the house.

Mr. Legere's rambunctious, straight-shooting style has become synonymous with T-Mobile's image as the alluring iconoclast of telecommunications. The company's defiance of industry rules -- eschewing contracts, paying early termination fees for consumers to switch carriers, unlimited data plans that extend to music streaming and other services -- has rejuvenated T-Mobile's business and jolted an entire industry.

Its audacious approach has struck a chord with consumers. T-Mobile added 1.5 million subscribers in its most recently completed quarter, marking the fifth consecutive quarter the carrier pulled in more than a million net new subscribers.

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While never publicly announcing an offer, Softbank, which owns a controlling interest in Sprint, the third-largest U.S. carrier, was understood to have made a $32 billion bid for T-Mobile. Last week, however, the Japanese company abruptly dropped its bid and replaced Sprint's CEO. In addition to regulatory hurdles, several analysts said T-Mobile's parent, Deutsche Telekom, thought Sprint's offer looked too low in light of T-Mobile's ascent.

Still, others continue to covet the company. In recent weeks, French telecom Iliad offered $15 billion for a majority stake citing T-Mobile's "disruptive position." And last week executives at Dish Network, the satellite-TV provider, also indicated interest in T-Mobile.

How those scenarios will play out is yet to be seen. But one thing is clear: the suitors are drawn by T-Mobile's mutinous marketing machine on display this June day as Mr. Legere storms the Seattle stage.

Emerald City Revival

Among the biggest benefactors of T-Mobile's success so far have been ad agencies in the Emerald City.

Despite the seismic shifts of the "Uncarrier" campaign, T-Mobile did not change agency partners, which are primarily Publicis shops -- Optimedia International, Razorfish and Big Fuel, among others. Chief Marketing Officer Mike Sievert claimed adjustments were unnecessary. "The biggest surprise was the quality of the talent coming in here," he said. "I really thought that the team and agency support would need to be upgraded. But I was wrong."

T-Mobile has a deeply entrenched relationship with Publicis, Seattle and its chief, Scott Foreman, according to multiple creatives in Seattle. At the onset of the "Uncarrier" effort, Mr. Foreman proposed bringing in his sibling agency, Publicis & Hal Riney, San Francisco, to assure T-Mobile it would get a fresh point of view. The move appeased the operator and ensured Publicis would keep its flagship Seattle client. "T-Mobile felt like they were getting a new leadership team," said one agency executive who has worked with the company.

Now, after some work had shifted south, power is gravitating back to Seattle. Marketing executives at the carrier like to keep a close watch on the messaging and prefer partners in their backyard. In its latest business review, T-Mobile pressed for the bulk of its agency work to return to its local partners, one agency executive said.

The timing couldn't be better.

In April, Microsoft, a $2.6 billion ad spender, shifted media business to Dentsu Aegis and Interpublic Group of Cos. from WPP and Publicis. Both incumbents are in the process of thinning jobs in the city, according to an agency executive. Amazon, the other local behemoth, is considered a frustrating client.

T-Mobile is demanding -- since the "Uncarrier" campaign launched, the operator has expected shorter lead times for creative work. But agency partners laud the carrier as a client willing to experiment and cede some decision-making, particularly on the most-charged advertising. "It's fun to be the burr in the saddle," said Mr. Foreman.

For his shop, T-Mobile is not simply fun. "It's their biggest client," said another agency executive. "It's what keeps the lights on."

Top of mind is the potential for those lights to turn off. In June, when speculation surfaced that Sprint would make a bid to acquire T-Mobile, ad agencies had a case of déjà vu. Another larger competitor, AT&T, had lobbied to buy T-Mobile three years ago, putting their jobs in jeopardy.

Last week, Sprint relinquished its plans. Yet several more potential buyers have emerged, each promising uncertain futures for the T-Mobile brand and its affiliates. T-Mobile has neither confirmed nor denied the possibility that the carrier could change hands. "We're in an industry where, literally, every client is 90 days away," said Jason Sullivan, managing director, Publicis, Seattle.

For now, creatives in the West Coast city are keeping their heads down -- if anything, the AT&T and the Sprint episodes taught them to ignore merger chatter.

—Mark Bergen

"Right now, there's a euphoria," said Scott Foreman, CEO of Publicis Seattle, which has worked with T-Mobile since the brand's inception in the U.S. in 2002. "It truly is a revolution," offered Jason Sullivan, the agency's managing director. Mr. Legere, he said, has "put a face on a faceless industry."

Thirty minutes into his appearance at the Paramount Theatre, Mr. Legere sits down, pulls out his phone and fires off one of his hallmark coarse tweets. ("You guys want a shit ton of DATA," he wrote to customers, "so we built our network to fit you!") Then he surrenders the stage to his chief marketing officer—the face behind the face.

Evil genius
Slender, with wire-rimmed glasses and closely cropped hair, Mike Sievert, 45, looks the part of a Seattle software old hand. Before coming to T-Mobile two months after Mr. Legere in November 2012, Mr. Sievert served in marketing roles at AT&T and E-Trade. He also managed business operations with IBM, Microsoft and Clearwire, a wireless broadband operator purchased by Sprint last year. A tech startup he co-founded, Switchbox Labs, was acquired by Lenovo in 2009.

Next to his CEO, Mr. Sievert is bookish and reserved. However, marketers who have worked with him say he doesn't shy away from aggressive tactics. Tyler Davidson, who reported to Mr. Sievert at AT&T Wireless, calls him "fiercely competitive" and "one of the brightest minds in marketing." He credits Mr. Sievert with pioneering unlimited voice minutes at AT&T, a move aimed squarely at rival Verizon. "Mike really likes to agitate," said Mr. Davidson, now chief revenue officer for mobile analytics firm PushSpring. "He's always looking for the next trick up his sleeve."

During an interview at T-Mobile's Bellevue headquarters, in a room blanketed in the company's trademark magenta, Mr. Sievert said the initial "Uncarrier" idea came from Mr. Legere. Yet agency partners credit Mr. Sievert with executing the nuts-and-bolts of T-Mobile's turnaround, which leans on its CEO's outsized public persona and a fatter marketing budget. Since 2010, T-Mobile has nearly doubled its advertising spending, reaching $1.07 billion last year, according to the Ad Age DataCenter.

"John wants to see what they make," said Mr. Foreman. "But Mike and Peter [DeLuca] are driving the marketing."

In many ways, Mr. DeLuca, senior VP-brand and advertising -- along with lieutenants such as Andrew Sherrard, a senior VP and 11-year company veteran -- serves the role typical of CMOs, coordinating the logistics with agency partners, celebrity endorsers and its retail outlets.

Mr. Sievert plays a much broader role in operations. He is a constant, vocal presence on T-Mobile's earnings calls. During the company's first-quarter call, Mr. Legere fielded an analyst's technical question, leveling a joke at Sprint's spokesman, Pharrell Williams ("If I hear that 'Happy' song one more time, I'm going to stab somebody"), before turning to Mr. Sievert. The CMO largely evaded the query -- on the impact of new promotional plans from the three larger carriers on the subscribers flocking to T-Mobile -- and defended T-Mobile's decision not to disclose that particular metric. He also took his own potshot at Sprint's newest subscriber plan. One PR veteran at T-Mobile said Mr. Legere occasionally refers to his CMO as an "evil genius."

"[Mr. Sievert] and I are having a terrific time disrupting this industry," Mr. Legere wrote in an email. "The turnaround of our T-Mobile brand is no accident. Mike's work is changing this industry and driving our business."

In addition to his involvement with Wall Street, Mr. Sievert is a guiding hand in every step of the creative process at T-Mobile and MetroPCS, the carrier T-Mobile acquired in May 2013. His "evil" moniker may stem from his reputation for turning to tactics that undercut the competition, and orchestrating them with cool precision.

Despite Mr. Legere's unscripted panache, the carrier is noted for its tight messaging control, akin to Amazon and Apple. Only a handful of T-Mobile employees were aware of its recent Super Bowl spot up to a few days before it went live. One ad sales executive who partnered with T-Mobile on a media buy was required to work on a project at the company's headquarters -- lest the executive run off with sensitive documents.

In conversation, Mr. Sievert moves swiftly from arcane telecom topics to social media. At T-Mobile's headquarters, Mr. DeLuca informs him that during the "Uncarrier" event, AT&T outbid them on a promoted Twitter hashtag. "Who cares?" Mr. Sievert responds. "That's fantastic." He mocks his old company for wasting its bigger budget, then boasts that T-Mobile has netted 100 million unpaid impressions since.

"He has really helped push the envelope," said Tracy Wong, exec creative director of WongDoody, which runs in-store marketing for the carrier. "Historically speaking, you wouldn't have a CMO as concerned with retail as he is."

Mr. Sievert's expansive role reflects an industry shift. National smartphone penetration is peaking, which means carriers must find new ways to milk revenue from subscribers. Or steal them. That has never been simple in an industry widely reviled by consumers. People love their smartphones; they hate their carriers. But turnover is low.

For years, telecom firms operated with an unspoken truce not to disparage the industry -- bash the competitor, but don't point out how despised the business is. T-Mobile tore that truce apart.

Over the past 17 months, the "Uncarrier" offerings have prompted similar discounts and maneuvers from all other carriers. In its second-quarter earnings, AT&T reported that half its smartphone sales came from subscribers to Next, its contract-free plan introduced last December.

"In an industry that's basically a commodity, it's all about what you can provide your customers and what you can bill. Part of it is [going] to be translated to marketing," said Mr. DeLuca. "What else is there, if you think about it?"

Golden handcuffs
At lunch, a day after the Macklemore show, Mr. DeLuca is famished. Three weeks prior, T-Mobile shifted the event from Los Angeles to Seattle, after concluding the national press would be in town to see local peer Amazon unmask its smartphone. He had not sat down for a meal in two days; at the event, brimming with cocktails and catered appetizers, he managed to slip in a slice of salami. "I have no time," he said.

He was also swamped three years ago, when T-Mobile was prepping for a since-aborted purchase by AT&T, a rival it had spent years loathing. The department he then oversaw, corporate communications, was forced to add business sponsorships, then social media, to its mandate, as the board deemed hiring futile as the acquisition was looming. Mr. DeLuca was balancing deck chairs aboard a Titanic.

He wasn't alone. Across the company, staff were given pay bumps to prevent departures. "People were staying because of golden handcuffs," said one former T-Mobile marketer, "not because of any loyalty." Morale tanked. It extended to the company's ad partners. Asked about the time, Mr. Wong bows his head and shakes it.

The mood is markedly different today, though marketers within and around T-Mobile are quick to claim it's always been a scrappy challenger. It emerged from lean coastal networks, Western Wireless and VoiceStream, which morphed into T-Mobile. Several hailed the company as the "original social brand." In 2006, the carrier launched MyFaves, a plan that allowed for unlimited calling to five contacts. When Apple launched the iPhone with AT&T, T-Mobile ran spots blasting the larger operator.

When AT&T made its bid in 2011, T-Mobile's share of U.S. retail subscribers fell below 10%, according to research firm Comscore. It continued to fall, reaching 8.2% in March 2013. Over the subsequent five quarters, thanks to the "Uncarrier" campaign, it rose steadily, hitting 9.7% -- and approaching third-place Sprint.

"The core DNA of the brand is still there," Mr. DeLuca said, when asked how the company has changed. "We're more competitive, and we're truly, truly, truly customer-focused."

Others argue the makeover was more pronounced. The older T-Mobile was primarily a sales-promotions company. Around a decade ago, it pushed a major rebrand under the slogan "Stick Together," meant to shift the marketing emphasis from the specific phone plan offerings to an emotional connection with the brand. It never took off. A former marketer with T-Mobile described the campaign as "schizophrenic" and lacking "strong consistency." T-Mobile was best known for its spotty network coverage.

The company began losing subscribers and slipped into AT&T's sights. When regulators in Washington, D.C., rejected the deal in December 2011, the kibosh left T-Mobile two gifts: a new lease on life and a huge pile of cash.

Deutsche Telekom, T-Mobile's parent company, took AT&T's "break-up" fee that was set in the original merger terms if the deal fell through -- $3 billion in cash and $1 billion worth of AT&T spectrum -- and poured it into T-Mobile's network and brand. Many of the central "Uncarrier" initiatives had been under consideration inside the company for years, according to former marketers there. The possibility of shedding contracts was discussed as early as 2007. But it was the AT&T offering that gave T-Mobile the cushion to execute the ideas -- and the money to lure in executives like Mr. Sievert to package and sell them.

Foul-mouthed Braggadocio
Mr. Legere is a marketer's dream and a PR executive's nightmare. Robert Dotson, T-Mobile's CEO from 2003 to 2010, admired advertising but was very press shy, as was his successor, Philipp Humm, Deutsche Telekom's handpicked choice.

Mr. Legere, a former AT&T executive and CEO of operator Global Crossings, is emphatically not.

He is frantically active on Twitter, sending his 375,000-plus followers a mixture of viral articles, comic-book references and foul-mouthed braggadocio aimed at the three larger U.S. carriers. In January, he was booted from an AT&T event at the Consumer Electronics Show; he was outed by a photo a reporter snapped with him then posted on Twitter. After the post, Mr. Legere was escorted out of AT&T's venue. His brusqueness can land him in hot water. At the "Uncarrier" event in June, amid a verbal rampage against Verizon and AT&T, he said, "These high and mighty duopolists [are] raping you for every penny you have." The comments elicited hoots of approval from the audience comprised mostly of T-Mobile retail employees.

The next day, however, it prompted an admonishment by the business press and a rare Twitter apology from Mr. Legere. ("If I worked for him," one seasoned public relations staffer in Seattle said, "I'd get an ulcer.") T-Mobile staff insists Mr. Legere is unscripted on social media and in public. And they shrug off concerns. "That's just how he is," said Mr. Sievert.

"He's authentic," Mr. Sievert continued. "He's not filtered, the way it is from some executives." He added, "It's certainly helping our brand."

Agency executives who work with T-Mobile compared the CEO with the city's famed founders: Jeff Bezos of Amazon and Howard Schultz of Starbucks. Even Steve Jobs. "He's a great example of a CEO who takes a brand seriously," said Susan Gianinno, chairwoman of Publicis Worldwide, North America. "He lives the brand."

At one point T-Mobile was tied to Catherine Zeta-Jones, who appeared in several commercials starting in 2002. Then there was Carly, the lithe brunette who dominated its marketing beginning in 2010. Last year, T-Mobile signed a contract with singer Shakira and ran popular Super Bowl spots with NFL bust Tim Tebow. But, despite all this star power, for many consumers the brand is synonymous with its leather-clad, cursing CEO.

"They've been real pioneers in using social media to create a real David-vs.-Goliath message," said Kevin Smithen, an analyst with investment firm Macquarie Capital. "John Legere deserves a medal."

Primed for a sale
Critics have accused Mr. Legere of buying subscribers, priming his company for sale. T-Mobile posted losses for four consecutive quarters before the last, when profits came largely from a spectrum swap with Verizon. In the first quarter, the company spent around $100 million covering the early termination fees for new subscribers.

Some analysts said T-Mobile may not be able to keep undercutting its competitors. Macquarie Capital downgraded T-Mobile's stock in late May to a neutral rating, in part based on concerns about the promotional plans catching up to the bottom line. Sprint, after dropping its acquisition bid, will "begin to play offense," said Mr. Smithen, and drive the price wars further. Mr. Sievert admitted T-Mobile is working to slim its expenses to keep its Uncarrier engine running. "We do need more capital; we need more network spectrum," he said. "Yes, we have to find a way for that to work."

T-Mobile could end up the victim of its own success. Regulators have been pleased by the fact that the carrier has pressured rivals to slice prices and are less inclined to consider the benefits of industry consolidation. If T-Mobile executives are worried, they aren't showing it. On the day Sprint replaced its CEO, Mr. Legere sent out a series of tweets eviscerating his competitor.

Near the end of the event at the Paramount Theatre in June, when a reporter asked about the Sprint merger talks. Mr. Legere cut him off. "OK, we're out of time now," he said, laughing. He gave the pat response about not commenting on rumors. Then he turned to the crowd.

"This Uncarrier movement will continue," he said. "In anything we do, it will be about the Uncarrier revolution and brand." With that, the audience erupted in cheers.

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In this article:

Mark Bergen

Mark Bergen covers mobile carriers, devices and advertising out of New York City. Earlier, he reported on technology and business from India for the New York Times, the Wall Street Journal, Reuters, and various publications.